Big Japanese life insurers, who are major bond investors globally, are primarily focusing on US bonds while staying cautious on European bonds, reported Reuters citing earning reports and industry executives.
US bonds have become more attractive as some Japanese insurers have been able to earn extra income by lending these to Japanese banks, which in turn use Treasuries as collateral to raise dollars in repo markets.
Nippon Life , Dai-ichi Life , Meiji Yasuda Life , Sumitomo Life and formerly state-owned Japan Post Insurance collectively manage more than US$2 trillion of financial assets.
Earnings disclosures showed US bonds accounted for a large part of the increase in their foreign bond holdings during the financial year that ended on 31 March.
The five insurers increased foreign bond holdings by a combined JPY6.3 trillion (US$56 billion). Of the total, they increased dollar bonds by JPY4.8 trillion, to JPY26.8 trillion.
Euro bond ownership increased at only one-tenth the pace of that of US bonds. Euro bonds rose by JPY488 billion with outstanding balances at 31 March 2017 standing at JPY7.0 trillion.